Understanding Coverage and Exclusions in HO-3 Homeowners Insurance, Exams of Insurance Economics

Download Understanding Coverage and Exclusions in HO-3 Homeowners Insurance and more Exams Insurance Economics in PDF only on Docsity! State Farm Fire Independent Policy Exam State Farm Fire Independent Policy Exam Containing 50 Questions with Best Chosen Solutions/ 2024-2025. Select the false statement listed below: In the HO-3 policy, the ALE payments will be made only for: Select the single best answer: A. The shortest time necessary to repair or replace the damaged property, but not to exceed 24 months. 1 | P a g e State Farm Fire Independent Policy Exam B. If the insured does not rebuild, the time necessary for the insured to relocate in permanent living quarters, but not to exceed 24 months. C. ALE payments can run beyond the expiration of the policy. D. ALE payments are limited to incurred costs for the shortest of three-time frames as dictated by the policy. E. ALE payments will not exceed 20% of Coverage A limits. - Answer: E. ALE payments will not exceed 20% of Coverage A limits. The insured has a HO-3 policy in force. All of the losses are covered except: Select the single best answer: A. Shed rented to a tenant, to store furniture B. Detached garage used to operate a lawnmower repair shop C. Garage rented to the neighbor to store an antique automobile D. Basement used as an office for insured's bookkeeping business E. Garage (attached) rented to tenant to store fishing boat - Answer: B. Detached garage used to operate a lawnmower repair shop Jennifer Marco has a HO-3 policy, with a Coverage B limit of $75,000, a $500 deductible, and no Option AI, ID, FA or JF. Which of the following statements is true concerning her personal property? Select the single best answer: 2 | P a g e State Farm Fire Independent Policy Exam True or False - Answer: False Under an HO-3 policy, which of the following would be a Coverage B item? Select the single best answer: A. Satellite dish bolted to the eave of the house B. Free standing gas range C. Built-in microwave oven D. Automatic garage door opener E. Water softener system - Answer: Free Standing gas range Under an HO-3 policy, which of the following would not be a Coverage A item? Select the single best answer: A. Automatic lawn sprinkler system B. Wall to wall carpet attached to the dwelling C. A new (in the box), built-in microwave oven the insured intends to install in his fishing cabin. D. A shed, on a foundation, rented to a neighbor to store the neighbor's boat E. Materials and supplies to build bookshelves in the basement of the residence premises and stored in the garage - Answer: E. Materials and supplies to build bookshelves in the basement of the residence premises and stored in the garage 5 | P a g e State Farm Fire Independent Policy Exam An HO-3 homeowners policy with a $250 deductible is in force and the policy limits (Coverage A and Coverage B) are adequate to cover this damage. During a severe windstorm, rain blows through open windows and causes the following damage: Hardwood floor in the dining room $1,700 Water stains on the drywall $ 220 Water stains on the area rug $125 Antique vase (broken by force of wind) $375 How much should you pay on this loss? All repairs have been made. Select the single best answer: A. $ 0 B. $1,920 C. $2,420 D. $2,170 E. $2,045 - Answer: 2170 If a picture falls from a wall and damages an expensive statue, under the HO-3 coverage for the statue would: Select the single best answer: A. Apply under the falling object peril 6 | P a g e State Farm Fire Independent Policy Exam B. Not apply, not an insured peril C. Apply under the collapse peril D. Not apply since it should have been insured under a personal articles policy E. None of the above - Answer: not apply, not an insured peril Bill Smith constructed an awning beside his detached garage, under which he stores his small fishing boat. He screwed the framing of the awning to the fascia of the garage and supported the other side with posts set in concrete. Since the awning has no foundation, it is not considered a Coverage A item. True or False - Answer: False Mike and Jennifer Reed have an HO -3 policy in force with $250 deductible. Lightning struck the insured's house, damaging the house and the contents. Mike is a policeman and operates a engine repair shop in a shed on the insured premises. Jennifer is a sales representative and often has samples and merchandise at the house. The following items where listed on the personal property inventory forms submitted after the loss. Cash in Mike's billfold $35.00 Cash in Jennifer's purse $160.00 Change in piggy bank $25.00 Hand tools used in Mike's business $780.00 Jennifer's sales samples $320.00 Mike's police uniform $375.00 7 | P a g e State Farm Fire Independent Policy Exam 4 hunting rifles $1,820.00 3 shotguns $870.00 Use the information listed above to answer the following question. How much of the deductible, if any, would be absorbed in this loss? Select the single best answer: A. $ 0 B. $100 C. $475 D. $250 E. $120 - Answer: 250 Lightning hits a power transformer two streets away from the risk and knocks out the power to the entire area. The temperature is in the 20's and our insured's home is heated by an electric furnace. The insured has a HO-3 policy in force. ALE will be payable on this loss. True or False - Answer: False In the HO-3 policy, resulting ALE and Fair Rental Value can be paid for up to two weeks if use of the premises is prohibited by civil authorities because of direct covered damage to a neighboring premises caused by a loss insured. True or False - Answer: True 10 | P a g e State Farm Fire Independent Policy Exam An HO-3 policy is in force with coverage A limits of $75,000. The policy has a $1,000 deductible. The house is totally destroyed by a tornado and the cost to replace the house is $75,550 plus debris removal of $4,225 for a total claim of $79,775. All repairs have been completed. What is the amount of your final settlement? Consider the deductible in your calculations. Select the single best answer: A. $79,775 B. $78,750 C. $78,775 D. $77,750 E. $74,000 - Answer: 78750 Our insured has a HO-3 policy in force. The insured premises is located on the Gulf Coast. The National Weather Bureau issued a hurricane warning affecting the insured premises on July 18th. The insured removed antique furniture and stored it in a warehouse 50 miles inland. The furniture was damaged by flood waters August 22nd. We will pay for the damage to the furniture. True or False - Answer: False The insured has an HO-3 policy with a Coverage A limit of $250,000 and Option ID of $50,000. The in-ground swimming pool, located 20 feet away from the home, is 11 | P a g e State Farm Fire Independent Policy Exam totally destroyed by a loss insured. What is the maximum amount you can pay for pool debris removal and replacement of the pool? Select the single best answer: A. $25,000 B. $31,500 C. $30,000 D. $26,250 E. $50,000 - Answer: 26250 In an HO-3 policy, Option AI (Additional Insured) provides coverage for: Select the single best answer: A. Coverage C B. Coverage B C. Coverage A D. Coverage A and Coverage B E. Coverage A and Coverage C - Answer: C. Coverage A Under an HO-3 policy with Option JF, which if the following statements is true concerning a jewelry loss? Select the single best answer: 12 | P a g e State Farm Fire Independent Policy Exam The insured (HO-3 policy in force) is building a barn on property where he plans to build a new home and move in the future. The property is not listed on the Declaration Page. During the construction process he stores construction materials and supplies for the barn in his detached garage at the insured premises. These building materials and supplies are destroyed. They are not covered under Coverage A. True or False - Answer: True Chuck Bailey has a HO-3 policy with Loss Settlement Provisions of A1 & B1. After Chuck has made repairs to Coverage A items and replaced Coverage B items, claim payment (subject to any limit of liability) will be based upon which of the following amounts? Select the single best answer: A. Salvage value B. Replacement cost C. Market value D. \Original purchase price E. Actual cash value - Answer: Replacement cost In the HO-3 policy, temporary repairs: Select the single best answer: 15 | P a g e State Farm Fire Independent Policy Exam A. Are available for reasonable and necessary costs incurred, caused by a loss insured. B. Provide an additional amount of insurance for temporary repairs to covered property. C. Are to protect the property from further immediate damage or loss. D. A, B and C are correct. E. A and C are correct - Answer: E. A and C are correct Option ID under the HO-3 applies to: Select the single best answer: A. The dwelling and other building structures B. All covered structures C. The dwelling D. The dwelling and all other structures E. Both A and D - Answer: The dwelling and other building structures Which of the following statements can apply to Debris Removal Coverage in the HO-3 policy? Select the single best answer: 16 | P a g e State Farm Fire Independent Policy Exam A. Pay up to $500 in the aggregate for each loss to cover the reasonable expenses incurred in the removal of tree debris from the residence premises when the tree has caused a loss insured to Coverage A property. B. We will pay the reasonable expenses incurred in the removal of debris of covered property damaged by a loss insured. This expense is included in the limit applying to the damaged property. C. When the amount payable for the property damage plus the debris removal exceeds the limit for the damaged property, an additional 5% of that limit is available for debris removal expense. D. All of the above E. None of the above - Answer: all of the above Assume an HO-3 is in force. The insured's home is damaged by a severe windstorm and the family is forced to move into a motel for 2 weeks. The insured provided the following receipts. The water, electricity and telephone remained in service following the loss. Amount Paid Amount Normally Spent Mortgage Payment $985 $985 Hotel Bills $1,075 $0 Water $25 $35 Electricity $125 $95 Telephone $10 $38 Cable TV $0 $29 Meals in Restaurants $505 $150 17 | P a g e State Farm Fire Independent Policy Exam Select the single best answer: A. Sue B. Sue, Louis, Tammy, and Matt C. Sue and Louis D. Sue, Louis, and Tammy E. Sue, Louis, Tammy, Matt, and Mildred - Answer: E. Sue, Louis, Tammy, Matt, and Mildred During a severe thunderstorm, water puddled on the lawn, in a low area in front of our insured's sliding glass door. The water accumulated to the point that it seeped under the door, damaging the hardwood floor, wall paper, vertical blinds, and area rug. HO-3 policy is in force with the following limits: Coverage A $75,000 Dwelling Extensions $7,500 Coverage B $56,250 Deductible $500 The insured presents the following claim: Sand and finish floor $650 Remove and replace wall paper $320 Remove and replace vertical blinds $175 Replace area rug (contents) $35 20 | P a g e State Farm Fire Independent Policy Exam All repairs are complete. How much do you owe the insured? Select the single best answer: A. $680 B. $0 C. $470 D. $325 E. $645 - Answer: 0 Assume you have a HO-3 policy in force and do not have any endorsements added to the policy. Which of the following types of loss will be covered? Select the single best answer: A. The home sustains structural damage due to an earthquake. B. A landslide carries a large tree into the side of the insured home causing structural damage. C. The home is located in a non flood area, but following heavy rains the home sustains structural damage from 13 inches of flood water standing in the house for three days. D. The home is located on the western shore of Lake Michigan. The house is condemned because the yard is subsiding and falling into the lake. 21 | P a g e State Farm Fire Independent Policy Exam E. None of the situations are covered by the HO-3. - Answer: None of the situations are covered by the HO-3. Mike and Dorothy Jackson have a HO-3 policy with a $250 deductible. Their entire redwood basket weave fence, which surrounds the rear yard, is destroyed in a windstorm. The cost to replace the fence is $1,300. The Actual Cash Value of the fence is $900. Repairs are complete. How much do you owe Mr. and Mrs. Jackson? Select the single best answer: A. $0 B. $1,300 C. $ 900 D. $1,050 E. $ 650 - Answer: 650 Under an HO-3 policy, which of the following statements about Option JF is false? Select the single best answer: A. Coverage applies for accidental direct physical loss or damage, unless otherwise stated. B. Coverage applies only for the Coverage B named perils. C. The limits for this option are shown in the declarations. 22 | P a g e State Farm Fire Independent Policy Exam policy. Paul stayed at the cabin for two weeks and performed repairs on the cabin during his stay. Paul brought with him the building materials, supplies and tools necessary to make repairs. He also brought sporting equipment and clothes. Lightning struck the cabin, damaging it and personal property while Paul was there. All of the furniture and appliances normally remain at the cabin. Use the information listed above to answer the following question. Select the true statement listed in the answer choices: Select the single best answer: A. The furniture and appliances are subject to the 10% or $1,000 limit under Coverage B. B. The policy does not provide any coverage for the furniture and appliances because the cabin is not listed on the Declaration page. - Answer: That furniture and appliances are subject to the 10% or $1000 limit under Coverage B Paul Smith owns a home at 1526 Keystone Rd. with a HO-3 policy in force. He also owns a cabin in the mountains which is not listed on the declaration page of his policy. Paul stayed at the cabin for two weeks and performed repairs on the cabin during his stay. Paul brought with him the building materials, supplies and tools necessary to make repairs. He also brought sporting equipment and clothes. Lightning struck the cabin, damaging it and personal property while Paul was there. All of the furniture and appliances normally remain at the cabin. 25 | P a g e State Farm Fire Independent Policy Exam Use the information listed above to answer the following question. The furniture and appliances have been replaced. You have verified the actual cash value for them to be $6,135 and the replacement cost to be $8,325. The Coverage B limit is $80,000, the policy deductible is $250 and Loss Settlement Provision is B1. What is the amount payable for the furniture and appliances - Answer: 8000 Our insured's residence premises suffered damage to floor coverings, baseboards, drywall and personal property following exceptionally heavy rains that caused a nearby creek to rise and water enter the home. While the insured's were out of their home due to the flooding, looters stole lawn equipment from inside the detached garage. Under the HO-3 policy, what items would be covered? Select the single best answer: A. Stolen lawn equipment B. Coverage A items damaged by rising water C. Coverage B items damaged by rising water D. Nothing is covered because of Section I - Losses Not Insured 2. c. (1) - Answer: A. Stolen lawn equipment An HO-3 policy is in force with Coverage A limits of $75,000, Coverage B limits of $56,250 and a deductible of $500. 26 | P a g e State Farm Fire Independent Policy Exam During a severe thunderstorm, a window is broken by hail and wind blows rain water through the window. Rainwater damages the hardwood floor, wall paper, vertical blinds, and an area rug. The insured presents the following claim: Sand and finish floor $650 Remove and replace wall paper $320 Remove and replace vertical blinds $175 Replace area rug $35 All repairs are complete. How much do you owe the insured? Select the single best answer: A. $325 B. $645 C. $470 D. $680 E. $ 0 - Answer: 680 Jo Smith has an HO-3 policy and grows exotic orchids as a hobby. Orchids cannot survive more than 80 degrees F. While Jo was on vacation, the electricity was out for several days. The temperature in the home rose to 95 degrees, causing the flowers to wilt and die. Immediately prior to the power outage, a tornado was spotted in the vicinity. Jo submitted a claim for $2,000. In order to pay the claim for the damaged flowers you must verify: 27 | P a g e